Hunton Retail Law Resource

On June 28, 2016, in two related settlements, German auto-manufacturer, Volkswagen AG (“VW”), has agreed to pay $14.7 billion to resolve allegations that the company cheated diesel emissions tests for nearly 500,000 2.0 liter diesel vehicles sold over six years. One settlement partially resolves EPA allegations for alleged violations of the Clean Air Act’s federal emissions standard; the other partially resolves FTC claims that VW violated the FTC Act by deceptively and unfairly advertising its “clean diesel” vehicles. VW also will pay damages to 44 states, Washington, D.C., and Puerto Rico. The announced settlements do not resolve pending civil claims concerning VW’s 3.0 liter diesel vehicles, or potential criminal liability.

An important Federal Trade Commission (FTC) decision was announced yesterday that trains a spotlight on claims of “biodegradability.” The FTC found that a manufacturer’s unsubstantiated claims regarding the biodegradability of plastic pellets used as product additives deceived industry and end-use customers. The case reemphasizes the FTC’s intent to enforce the FTC Act against unsupported “green” claims. For retailers and consumer product manufacturers, this case and the recent increase in consumer false advertising class actions emphasizes the importance of:

• due diligence regarding product claims made by vendors – ask for and maintain material to back up the claims and stick to the claims that can be supported; and
• strong indemnities against false and deceptive advertising claims.

Most marketers and retailers know that the consumer protection laws require that their advertising claims be substantiated, truthful and not misleading. But the new year is a good time to take stock of advertising campaigns, practices and procedures to make sure they pass muster under the Federal Trade Commission’s (FTC’s) latest guidance. The FTC’s recent enforcement actions provide a starting point.